Cookie Wars: How Audience Targeting Is Creating Intense Competition For Cookies

"Data Driven Thinking" is a new column written by members of the media community and containing fresh ideas on the digital revolution in media.

James Lancelot of Invite MediaToday's column is written by James Lancelot, Director of Professional Services at Invite Media, a buy-side optimization platform.

In recent years, the traditional agency strategy for DR campaigns has been to work with multiple ad network partners to ensure that their advertiser’s campaign is getting maximum reach. This also can limit an agency’s risk, because if one ad network partner performs poorly, they can be removed from the plan. Being in this position incentivizes the ad network to maintain a high level of performance and service to the agency. The problem with this model however, is that over the past few years more and more unique inventory has been moving away from ad networks and into ad exchanges. In fact, it is rare today to find an ad network that is not doing some kind of exchange inventory buying, and many exclusively buy off of ad exchanges.

The Shift To Audience Targeting

As has been talked about many times on this blog, a major shift is happening currently in the industry away from buying “inventory,” and moving towards buying “audiences.” Remarketing and 3rd party data targeted campaigns are driving this shift due to their strong performance and the branding impact of knowing a user’s interest or profile. Don’t get me wrong, inventory, context, creative, etc still all play a strong role, but the focus has very much shifted to “How do we get in front of our users?” on the best inventory and make it scale.

From a technical perspective, buying audiences means bidding on users, and how you bid on a user is based off of the cookies that have been dropped on that user’s computer. As everyone knows, these cookie “drop points” occur from an advertisers site or from a data provider through their publishers or some other proprietary system. Getting back in front of those users requires simply that you bid for the right to serve them an ad impression through any of the various exchanges when that said cookie pops up again.

Cookie Wars

This is where the old model of buying inventory is going to begin to directly conflict with buying audiences. The challenge is that for most advertisers (and data providers), audiences are finite. And because buying audiences (especially remarketing) is the “lowest hanging fruit” strategy for an agency to drive performance, their natural instinct is to work with multiple ad networks to “drive scale.” This is fine when an advertising campaign is run through one ad network or platform, but that is typically not the case. A single ad network with access to the exchanges can hit close to 100% of a unique audience in a given month.

Because the old model of working with multiple ad networks on a given campaign is still very much in full force, and the audience is finite, the “cookie wars” are ensuing. There are a few large exchanges that a significant number of ad networks work on, and they all bid for the same cookied users.

The Impact On Advertiser ROI

What is happening (all too often) is an agency will contract with 10+ ad networks (sometimes more), many of which are on all of the ad exchanges, and they all bid for the same cookied users. Not wanting to be the lowest on the totem pole in terms of delivery and scale, the ad networks raise their bids to ensure they win enough impressions. Consequently the price of that user to the advertiser gets inflated due to increased competitiveness in bidding. Furthermore, because the various networks are competing over the same cookie pool, and are not running through one centralized platform, they can't have a universal frequency per user. This, as you can imagine, turns into extreme waste for the agency and their advertiser.

A Centralized Solution

The industry is rapidly combating the aforementioned problem, for one, with centralized platform buying solutions. Agencies are getting much smarter and creating internal teams that manage bids and frequencies universally using such platforms. But there is still a long way to go, a lot of education, and consolidation that will need to happen. As agencies and their advertisers continue to evolve their thinking and strategies, it is going to be an exciting time as buying consolidates and advertisers really start to see strong performance on their campaigns.

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1 Comment

  1. Great point James, all advertisers should consolidate their retargeting efforts with one buying platform or network. When you're not bidding against yourself you become more efficient and its less work to manage the campaign. That way advertisers can get smart on optimal frequency or building unique retargeting segments based on site activity.

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